Anecdotal evidence suggests even affluent consumers are pulling back on spending, despite a strong stock market. This may be driven by concerns over the weakening job market, as even well-to-do parents worry about their adult children's employment prospects, creating caution across the family unit.

The sharp drop in the fiscal impulse represents a direct, dollar-for-dollar hit to nominal GDP that has already occurred. This indicates a recession is underway, not forthcoming. The National Bureau of Economic Analysis (NBER) will likely backdate the start of this recession to the third quarter of 2025.

Despite a 9.1% year-over-year increase in nominal sales, Black Friday data reveals consumers bought 4.1% fewer items and dramatically increased their use of "Buy Now, Pay Later" services. This indicates that inflation, not strong consumer health, is driving top-line revenue growth for corporations.

Contrary to popular belief, the US already underwent a recession in early 2024, particularly for the average consumer ("Main Street"). This was masked by the AI sector boom and soaring asset prices. Revised labor data supports this view, and the economy is now in a reacceleration phase.

Despite headline economic growth, the bottom 80% of U.S. households have seen their spending power stagnate since before the pandemic. Their spending has grown at exactly the rate of inflation, meaning their real consumption hasn't increased. This data explains the widespread public dissatisfaction with the economy.

Despite a still-growing labor market, real wage growth has slowed to "stall speed." This lagged effect on middle and lower-income households is the primary driver for the projected 2-percentage-point drop in real consumption growth for Q4 and Q1.

Consumer spending patterns in the gaming sector act as a canary in the coal mine for the economy. When consumers feel financial pressure, the first cutback is on destination travel like Las Vegas. A more severe warning sign of a pervasive downturn would be a subsequent decline in spending at local, regional casinos.

Top retailers report stable holiday sales, but this masks a weaker overall market with a negative trend. These giants are not thriving due to a strong consumer, but by capturing significant market share from smaller competitors in a contracting environment.

While headline forecasts predict a 3.5% rise in holiday sales, this is nearly entirely offset by inflation, which is running close to 3%. In real terms, consumer spending will be flat at best, meaning the average family's standard of living is declining this holiday season.